OFT investigation: British tobacco companies guilty of price fixing



Friday 16 April 2010

The Office of Fair Trading’s long-running investigation into price fixing by British tobacco companies has reached a dramatic conclusion with the revelation that Imperial Tobacco and Gallaher (now owned by Japan Tobacco International) have been charged with unfair trading practices. Together with a number of supermarkets with whom they traded, the companies have been fined a total of £225 million – the largest total fine to date under the Competition Act 1998. [1] The tobacco companies’ action shows a total disregard for UK company law as well as contempt for their customers.

Deborah Arnott, Chief Executive of the health campaigning charity ASH, said:

“The OFT investigation has confirmed what we have suspected for many years, that is, that the companies have been illegally colluding to fix the prices of their products.

In recent years the manufacturers have been raising the price of cigarettes to fill their own coffers, hiding behind the smoke-screen of tax rises, which they blame for the increases. [2]

While we approve of tobacco prices being high, the profits should go to the Government for redistribution into the health service, not to the tobacco industry. ”


ENDS

Notes and links:

Notes:
[1] Imperial Tobacco incurred the largest fine: £112.3 million while Gallaher was fined £50.3m.
Gallaher’s admission of illicit competition practices led to a reduction in the fine. This was revealed in preliminary findings released in July 2008.
Further details see OFT press release: OFT reaches early resolution agreements in tobacco case
and ASH comment July 2008

[2] The tobacco industry constantly claims that tax rises will lead to a rise in smuggling while glossing over the fact that it is their price fixing that has led to high prices. For example, following this year’s Budget, the Tobacco Manufacturers’ Association claimed that the tobacco tax rise “..will only provide further stimulus to those who seek to profit from the illicit trade in tobacco.” TMA press release 24/3/2010

[3] Contrary to tobacco industry propaganda, there is widespread public support for raising tobacco taxes above the rate of inflation, though there is no evidence of support for the tobacco industry to benefit from price rises.
According to a YouGov survey of adults in England, the public support by a clear majority the idea of raising the price of tobacco products faster than the rate of inflation: 58% of adults questioned in England support or strongly support raising the price of tobacco products faster than the rate of inflation. 24% oppose or strongly oppose the proposal. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 10276 adults. Fieldwork was undertaken between 17th and 22nd March 2010. The survey was carried out online. The figures have been weighted and are representative of all England adults (aged 18+).